Royal & Sun Alliance yesterday cut another 1,000 jobs in the UK as it finally went cap in hand to investors to ask for £960m to plug reserving holes in the US.
As well as the 1,000 back office staff who will be leaving the company, Julian Hance the finance director will also be going after resigning yesterday when he revealed that £800m was needed to strengthen reserves, despite a number of large reserve increases in the past. He will leave next year with a £1.3m payout, £250,000 of which will accrue to him just for staying past December.
RSA, which is using Merrill Lynch, Goldman Sachs and Cazenove to underwrite the issue, will pay out £35m in fees.
Andy Haste, RSA's new chief executive, yesterday said he had "been all over the company like a rash" since joining, and was left with little choice but a rights issue. Investors will be offered one new share for each existing share at 70p, a 55 per cent discount to Wednesday's closing price. A rights issue had been considered in November, when the company posted record losses, but investors refused their support. Bob Mendelsohn, the then chief executive, was forced to leave and the company embarked on a disposal programme. Mr Haste yesterday said, however, that this was not enough.
"We could have used our surplus capital to deal with the US, but that would only have dealt with our past and left us nothing for our future," Mr Haste said. "A rights issue gives us the ability to do both."
He also announced plans which will leave RSA with £355m in surplus capital by 2005, from £300m at present.
But one analyst said: "This company is still a shambles. They have admitted they have been woefully under reserved for years, they have given away their US business, and had to put in more than £500m to prop it up. One bad storm could easily wipe out their surplus, and shareholders have just seen their holdings halve." Shares in RSA, which also said first half profits had leapt 135 per cent after strong underwriting profit in the UK closed down nearly 14 per cent at 134.5p.
Mr Haste said he was taking a more "prudent" approach to reserving than his predecessor. Its UK life insurance businesses may need funds for mis-selling claims. The fresh round of job cuts takes the total to be axed in the UK over two years to 6,000. Mr Haste said 100 would be transferred to India as part of a pilot outsourcing deal for processing claims.